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Tech Data Corporation Reports First Quarter Fiscal Year 2018 Results


CLEARWATER, Fla., 1 June 2017:

Tech Data Corporation (NASDAQ: TECD) (the "Company") today announced its financial results for the first quarter ended April 30, 2017.


First quarter ended April 30,

($ in millions,
except per share amounts)

2017

2016

Y/Y
Change

Net Sales

$7,664.1

$5,963.4

29%





Operating income (GAAP)

$75.1

$52.6

43%

Operating margin (GAAP)

0.98%

0.88%

10 bps





Operating income (Non-GAAP)

$123.2

$57.6

114%

Operating margin (Non-GAAP)

1.61%

0.97%

64 bps





Net income (GAAP)

$30.7

$33.4

-8%

Net income (Non-GAAP)

$70.1

$37.0

89%





EPS - diluted (GAAP)

$0.82

$0.94

-13%

EPS - diluted (Non-GAAP)

$1.87

$1.05

78%


A reconciliation of GAAP to non-GAAP financial measures is presented in the financial tables of this press release.

This information is also available on the Investor Relations section of Tech Data's website at www.techdata.com/investor.

Financial Highlights for the First Quarter Ended April 30, 2017:

  • Net sales were $7.7 billion, an increase of 29 percent compared to the prior-year quarter. The increase in net sales is primarily due to approximately $1.6 billion for two months of net sales attributed to the Technology Solutions business acquired from Avnet, Inc. on February 27, 2017 ("Technology Solutions"). Excluding Technology Solutions' net sales, Tech Data's organic net sales increased approximately 5 percent on a constant currency basis.
    • Americas: Net sales were $3.5 billion (45 percent of worldwide net sales), an increase of 45 percent compared to the prior-year quarter. The increase in net sales is primarily due to approximately $1.0 billion of net sales attributed to Technology Solutions. Excluding Technology Solutions' net sales in the Americas, organic net sales increased approximately 5 percent on a constant currency basis.
    • Europe: Net sales were $4.0 billion (52 percent of worldwide net sales), an increase of 12 percent compared to the prior-year quarter. The increase in net sales is primarily due to approximately $0.5 billion of net sales attributed to Technology Solutions. Excluding Technology Solutions' net sales in Europe, organic net sales increased approximately 5 percent on a constant currency basis.
    • Asia Pacific: Net sales were $0.2 billion (3 percent of worldwide net sales). Asia Pacific net sales are attributed to the addition of Technology Solutions.
  • Gross profit was $457.1 million, an increase of $158.5 million, or 53 percent compared to the prior-year quarter. As a percentage of net sales, gross profit was 5.96 percent compared to 5.01 percent in the prior-year quarter. The increase in gross profit and gross margin percentage is primarily attributable to the addition of Technology Solutions.
  • Selling, general and administrative expenses ("SG&A") were $352.6 million, or 4.60 percent of net sales, compared to $246.5 million, or 4.13 percent of net sales in the prior-year quarter. Non-GAAP SG&A was $333.9 million, an increase of $92.8 million, or 39 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP SG&A was 4.36 percent, compared to 4.04 percent in the prior-year quarter. The increase in both dollars and percentage of net sales is primarily attributable to the addition of Technology Solutions.
  • Worldwide operating income was $75.1 million, or 0.98 percent of net sales compared to $52.6 million or 0.88 percent of net sales in the prior-year quarter. Non-GAAP operating income was $123.2 million, an increase of $65.6 million, or 114 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 1.61 percent, an improvement of 64 basis points over the prior-year quarter.
    • Americas: Operating income was $50.9 million, or 1.47 percent of net sales, compared to $31.3 million, or 1.31 percent of net sales in the prior-year quarter. Non-GAAP operating income was $78.5 million, an increase of $47.1 million, or 150 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 2.26 percent, an improvement of 94 basis points over the prior-year quarter.
    • Europe: Operating income was $24.8 million, or 0.62 percent of net sales, compared to $24.9 million, or 0.70 percent of net sales in the prior-year quarter. Non-GAAP operating income was $44.1 million, an increase of $14.3 million, or 48 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 1.10 percent compared to 0.83 percent in the prior-year quarter.
    • Asia Pacific: Operating income was $4.3 million, or 2.28 percent of net sales. Non-GAAP operating income was $5.2 million, or 2.76 percent of net sales.
    • Stock-based compensation expense was $4.9 million, an increase of $1.3 million, compared to the prior-year quarter. These expenses are excluded from the regional operating results and presented as a separate line item in the company's segment reporting (see the GAAP to non-GAAP reconciliation in the financial tables of this press release).
  • Net income was $30.7 million, compared to $33.4 million in the prior-year quarter. Non-GAAP net income was $70.1 million, an increase of $33.0 million, or 89 percent, compared to the prior-year quarter.
  • Earnings per share on a diluted basis ("EPS") were $0.82, compared to $0.94 in the prior year quarter. Non-GAAP EPS was $1.87, an increase of $0.82, or 78 percent compared to the prior-year quarter.
  • Net cash generated by operations during the quarter was $224 million.
  • Return on invested capital on a non-GAAP basis for the trailing twelve months was 13 percent, compared to 14 percent in the prior year period.

"We are pleased to report an excellent start to fiscal year 2018. During Q1, we leveraged the breadth of our vendor and customer portfolios and the flexibility of our business model to deliver solid top-line growth and excellent profitability," said Robert M. Dutkowsky, chief executive officer. "Our regional teams executed well throughout the quarter, capitalized on market opportunities and surpassed their profitability goals. This enabled Tech Data to exceed our expectations on our key financial metrics, including sales, non-GAAP operating and net income, and non-GAAP earnings per share. In addition, we generated strong operating cash flow and paid down a portion of long-term debt, an important first step in our commitment to deleverage the company. Tech Data delivered these strong results, while at the same time making excellent progress on integrating Technology Solutions - the largest and most transformative acquisition in our company's history. And our first quarter performance - the first as a combined company - is a testament to the outstanding execution capabilities of our operations, the skills and talent of our people, and the strength and diversity of our end-to-end portfolio of IT solutions."

Business Outlook  

  • For the quarter ending July 31, 2017, the Company anticipates worldwide net sales to be in the range of $8.55 billion to $8.80 billion. This guidance assumes an average U.S. dollar to euro exchange rate of $1.10 to €1.00.
  • For the quarter ending July 31, 2017, the Company anticipates non-GAAP EPS to be in the range of $1.95 to $2.08.
  • This guidance assumes stock compensation expense of approximately $7 million and interest expense of approximately $26 million.
  • This guidance also assumes weighted average diluted shares outstanding of 38.5 million and an effective tax rate in the range of 31 percent to 33 percent.

Webcast Details

Tech Data will hold a conference call today at 9:00 a.m. (ET) to discuss its financial results for the first quarter ended April 30, 2017. A webcast of the call, including supplemental schedules, will be available to all interested parties and can be obtained at www.techdata.com/investor. The webcast will be available for replay for three months.

Non-GAAP Financial Information

The non-GAAP financial information contained in this release is included with the intention of providing investors a more complete understanding of the Company's operational results and trends, but should only be used in conjunction with results reported in accordance with Generally Accepted Accounting Principles ("GAAP"). Certain non-GAAP measures presented in this release or other releases, presentations and similar documents issued by the Company include sales, income or expense items as adjusted for the impact of changes in foreign currencies (referred to as "constant currency"). Certain non-GAAP measures also exclude acquisition-related intangible assets amortization expense, benefits associated with legal settlements, acquisition and integration-related expenses and acquisition-related financing expenses. A detailed reconciliation of the adjustments between results calculated using GAAP and non-GAAP in this release is contained in the attached financial schedules. This information can also be obtained from the Company's Investor Relations website at www.techdata.com/investor.

Forward-Looking Statements 

Certain statements in this communication may contain "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements, including statements regarding Tech Data's plans, objectives, expectations and intentions relating to the Technology Solutions business ("Technology Solutions"), Technology Solutions' expected contribution to Tech Data's results, the expected benefits of Technology Solutions, Tech Data's and Technology Solutions' financial results and estimates and/or business prospects involve a number of risks and uncertainties and actual results could differ materially from those projected. These forward looking statements are based on current expectations, estimates, forecasts, and projections about Technology Solutions and the operating environment, economies and markets in which Tech Data and Technology Solutions  operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward looking statements. In addition, any statements that refer to projections of Tech Data's or Technology Solutions' future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward looking statements. These forward looking statements are only predictions and are subject to risks, uncertainties, and assumptions. Therefore, actual results may differ materially and adversely from those expressed in any forward looking statements.

For additional information with respect to risks and other factors which could occur, see Tech Data's Annual Report on Form 10-K for the year ended January 31, 2017, including Part I, Item 1A, "Risk Factors" therein, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other securities filings with the Securities and Exchange Commission (the "SEC") that are available at the SEC's website at www.sec.gov and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Many of these factors are beyond Tech Data's control. Unless otherwise required by applicable securities laws, Tech Data disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Tech Data undertakes no duty to update any forward looking statements contained herein to reflect actual results or changes in Tech Data's expectations.

 

About Tech Data  

Tech Data Corporation is one of the world's largest wholesale distributors of technology products, services and solutions. Its advanced logistics capabilities and value added services enable 115,000 resellers to efficiently and cost effectively support the diverse technology needs of end users in more than 100 countries. Tech Data generated $26.2 billion in net sales for the fiscal year ended January 31, 2017. It is ranked No. 108 on the Fortune 500® and one of Fortune's "World's Most Admired Companies." To learn more, visit www.techdata.com, or follow us on Facebook and Twitter

Contacts:

Charles V. Dannewitz, Executive Vice President,Chief Financial Officer
727-532-8028 (chuck.dannewitz@techdata.com)

Arleen Quiñones, Corporate Vice President, Investor Relations and Corporate Communications
727-532-8866 (arleen.quinones@techdata.com

 

 

TECH DATA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)



Three months ended

April 30,


2017


2016





Net sales

$7,664,063


$5,963,362

Cost of products sold

7,206,975


5,664,751

Gross profit

457,088


298,611

Operating expenses:




Selling, general and administrative expenses

352,632


246,496

Acquisition and integration expenses

42,066


-

LCD settlements and other, net

(12,688)


(443)


382,010


246,053

Operating income 

75,078


52,558

Interest expense 

31,008


5,601

Other income, net 

(415)


(1,034)

Income before income taxes

44,485


47,991

Provision for income taxes

13,831


14,618

Net income

$      30,654


$      33,373





Earnings per share:




   Basic

$           0.82


$           0.95

   Diluted

$           0.82


$           0.94

Weighted average common shares outstanding:




   Basic

37,251


35,127

   Diluted

37,468


35,370

 

 

TECH DATA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(In thousands, except par value and share amounts)







April 30,


January 31,


2017


2017

ASSETS

(unaudited)



Current assets:




Cash and cash equivalents

$         861,541


$      2,125,591

Accounts receivable, net

4,538,603


3,047,927

Inventories

2,601,951


2,118,902

Prepaid expenses and other assets

253,453


119,906

    Total current assets

8,255,548


7,412,326

Property and equipment, net

133,761


74,239

Goodwill

698,442


199,021

Intangible assets, net

1,263,467


130,676

Other assets, net

205,390


115,604

    Total assets

$    10,556,608


$      7,931,866





LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$      4,924,292


$      3,844,532

Accrued expenses and other liabilities

690,826


493,199

Revolving credit loans and current maturities of long-term debt, net

486,156


373,123

Total current liabilities

6,101,274


4,710,854

Long-term debt, less current maturities

1,799,646


989,924

Other long-term liabilities

174,444


61,200

Total liabilities

$      8,075,364


$      5,761,978

Shareholders' equity:




Common stock, par value $0.0015; 200,000,000 shares authorized; 59,245,585
shares issued at April 30, 2017 and January 31, 2017

$                  89


$                  89

Additional paid-in capital

803,721


686,042

Treasury stock, at cost (21,117,840 and 24,018,983 shares at  April 30, 2017
and January 31, 2017

(941,634)


(1,070,994)

Retained earnings

2,659,947


2,629,293

Accumulated other comprehensive loss 

(40,879)


(74,542)

      Total shareholders' equity

2,481,244


2,169,888

      Total liabilities and shareholders' equity

$    10,556,608


$      7,931,866

 

 

TECH DATA CORPORATION AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

(In thousands)



 Three months ended April 30, 2017


 Americas(1)


 Europe(1)


 APAC(1)


 Stock
Compensation
Expense  


 Consolidated

Net Sales

$   3,468,837


$ 4,006,920


$    188,306




$     7,664,063

GAAP operating income(1)

$        50,900


$      24,799


$        4,297


$            (4,918)


$          75,078

LCD settlements and other, net

$      (12,688)


-


-




$        (12,688)

Acquisition and integration
expenses

30,182


11,572


-


312


42,066

Acquisition-related amortization
of intangibles

10,101


7,748


900




18,749

Total non-GAAP operating income
adjustments

$        27,595


$      19,320


$           900


$                 312


$          48,127

Non-GAAP operating income

$        78,495


$      44,119


$        5,197


$            (4,606)


$        123,205

GAAP operating margin

1.47%


0.62%


2.28%




0.98%

Non-GAAP operating margin

2.26%


1.10%


2.76%




1.61%

(1)   GAAP operating income does not include stock compensation expense at the regional level.

 

 


Three months ended April 30, 2016


 Americas(1)


 Europe(1)


 Stock
Compensation
Expense


 Consolidated

Net Sales

$   2,388,004


$ 3,575,358




$     5,963,362

GAAP operating income(1)

$        31,275


$      24,940


$            (3,657)


$          52,558

LCD settlements and other, net

(443)


-




(443)

Acquisition-related amortization of intangibles

580


4,865




5,445

Total non-GAAP operating income adjustments

$             137


$        4,865




$            5,002

Non-GAAP operating income

$        31,412


$      29,805


$            (3,657)


$          57,560

GAAP operating margin

1.31%


0.70%




0.88%

Non-GAAP operating margin

1.32%


0.83%




0.97%

(1)   GAAP operating income does not include stock compensation expense at the regional level.

 

 

TECH DATA CORPORATION AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

(In thousands)


Selling, general and administrative expenses ("SG&A")

Three months ended April 30,


2017


2016

Net Sales

$           7,664,063


$           5,963,362

GAAP SG&A

352,632


246,496

Acquisition-related amortization of intangibles

(18,749)


(5,445)

Non-GAAP SG&A

$              333,883


$              241,051





GAAP SG&A percentage of net sales

4.60%


4.13%

Non- GAAP SG&A percentage of net sales

4.36%


4.04%

 

 


Three months ended April 30, 


2017


2016


Net Income

Diluted EPS


Net Income

Diluted EPS

GAAP Results

$30,654

$0.82


$33,373

$0.94

LCD settlements and other, net

(12,688)

(0.34)


(443)

(0.01)

Acquisition and integration expenses

42,066

1.12


-

-

Acquisition-related intangible assets amortization expense

18,749

0.50


5,445

0.15

Acquisition-related financing expenses

8,807

0.24


-

-

Income tax effect of the above adjustments

(17,529)

(0.47)


(1,333)

(0.03)

Non-GAAP results

$70,059

$1.87


$37,042

$1.05

 

 

Return on Invested Capital (ROIC)



Twelve months ended April 30,


2017


2016

TTM Non-GAAP Net Operating Profit After Tax (NOPAT)*:




Non-GAAP Operating Income

$                 404,583


$              326,441

Non-GAAP effective tax rate

29.1%


28.1%

Non-GAAP NOPAT (Non-GAAP operating income x (1 - non-GAAP effective tax rate))

$                 286,708


$              234,834





Average Invested Capital:




Short-term debt (5-qtr average)

$                 251,115


$                17,467

Long-term debt (5-qtr average)

697,482


349,842

Non-GAAP Shareholders' Equity (5-qtr average)

2,217,568


1,976,247

Total average capital

3,166,165


2,343,556

Less: Cash (5-qtr average)

(1,040,295)


(654,263)

Average invested capital less average cash

$              2,125,870


$          1,689,293

ROIC 

13%


14%





* Trailing Twelve Months is abbreviated as TTM.


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